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Banking 101: Where to Exchange Currency Without Paying Big Fees

Written by Joni Sweet | Published on 3/28/2019

Note: This article is part of our Basic Banking series, designed to provide new savers with the key skills to save smarter.

Making the most of a trip abroad requires careful planning. You’ve got to consider the costs of transportation, accommodations, food, activities and incidentals. But there’s still one more thing to add to your budget: Exchanging currency.

“Even though credit cards are accepted all over the world, you’ll still need local currency in your pocket to handle smaller transactions or make purchases at shops in local markets,” says Douglas A. Boneparth, a certified financial planner and president of Bone Fide Wealth, who has traveled all over Europe.

While you might not always be able to exchange currency without fees, there are some strategies you can use to reduce the cost of this important travel task. Here’s how.

Exchanging currency

Whether you’re exploring markets in Morocco, going on a business trip to Toronto or honeymooning in Paris, understanding the exchange rate of U.S. dollars to local currency can help keep your spending in check — and maximize your travel budget.

Don’t just use the estimates in your travel guide (which might be a year or two old). Changing economies mean the market exchange rate between currencies is always fluctuating, so check the latest rates at XE.com or reports from The Federal Reserve.

“If you walk into an establishment that’s exchanging currency at an unfavorable rate, you end up paying more and losing purchasing power,” says Boneparth.

Ways to skip big fees

Many companies try to earn a profit on currency exchange services by using a low exchange rate and charging fees. Fortunately, there are some ways to avoid spending more than necessary to get local currency.

Check with your local bank or credit union

One of the most convenient and cost-effective ways to exchange currency is at your local bank or credit union. Generally, the exchange rate the banks offer is only slightly less competitive than what you’ll see in reports from the Federal Reserve (the banks use this markup to cover some of the costs of the service).

If you want to exchange currency without fees, you may need to hold a certain type of account with your bank or order a large amount of foreign money. Some banks may charge you a fee if you order less than $1,000 worth of foreign currency or request delivery to your home. Shop around and ask about all potential costs until you find the most competitive offer.

“Getting a total and complete view of the cost structure and fees will put you in a position to make an informed decision,” says Boneparth.

Wondering what to do with foreign currency that’s leftover from a trip? Many banks will change paper money back to U.S. dollars at no cost. Foreign coins, on the other hand, are harder to exchange, so keep them as souvenirs or save them for a future adventure.

Get cash from an ATM

Rather than getting foreign currency before a trip, some travelers choose to withdraw cash from an ATM at their destination. Look for ATMs within your bank’s network to avoid extra fees. If you use a third-party ATM, you may be charged fees by both your bank and the ATM owner.

Some accounts do not charge foreign exchange fees when you use an overseas ATM—so you get the full value of the amount you withdraw. However, many banks do charge a fee of 1-3% of the U.S. dollar amount that you withdraw from ATMs in foreign countries. The low fees and vast accessibility of ATMs in most countries make this one of the most convenient ways to exchange currency on a trip.

Use your credit card

One of the best ways to exchange currency without fees doesn’t involve any paper money whatsoever: Your credit card.

“My wife and I knew we were going to spend quite a bit of money on our honeymoon to Italy, so we looked for a credit card that didn’t have a foreign transaction fee,” says Boneparth.

Check the fine print in your account agreement or call your issuer to find out if your credit card charges fees to make transactions abroad. If it does, you might want to consider applying for a new card with travel perks ahead of your trip.

Another reason you should pack your credit cards is their transparent exchange rates. You can check the exchange rates Mastercard and Visa offer on their websites. According to CompareCards,the exchange rates at these major credit cards companies beat what’s available at Travelex, a currency exchange business.

Before you go, let your credit card companies know when and where you’re traveling. They’ll put a note on your file that can help you avoid a credit card freeze when you’re shopping for souvenirs.

Order currency online

Some travelers also enjoy the convenience of exchanging currency with no fees online. Travelex, a 43-year-old foreign exchange business, can convert your dollars into more than 60 currencies and deliver it right to your door.

You won’t pay ordering fees or service charges to Travelex, but you may incur shipping costs if you order less than $1,000 worth of currency. You should also be mindful of Travelex’s exchange rates, which tend to be higher than those at banks and credit card companies.

While other online companies may offer to exchange currency with no fees, be extremely wary of where you place your order. There are predatory sites that may try to steal your personal information.

“Make sure that who you’re doing business with is established, credible and rated. Stick with leaders in the space and remember that anything that sounds too good to be true usually is,” says Bonaparth.

Airport kiosks

Walk into the arrivals hall of almost any international airport and you’re bound to see walls lined with currency exchange kiosks. While they’re a welcome relief to travelers who may have forgotten to get local money, airport kiosks rarely exchange currency without fees.

“Airport kiosks are not going to offer you the most competitive rate because they know you’re doing this on an immediate basis, when you probably forgot to exchange currency or don’t know of a better place to do so. You’ll also likely pay a convenience fee,” says Boneparth.

If you’re in a pinch and you have to exchange currency at the airport, ask if the vendor offers a break on fees or a more competitive rate if you transfer a higher amount. Doing so may help you reduce the out-of-pocket costs of getting local money.

Traveler’s checks

Traveler’s checks used to be one of the most reliable ways to keep your money safe when abroad. But in the 21st century, they’ve practically gone the way of the dinosaur.

American Express is one of the only major financial institutions that still offers traveler’s checks, and they may come at a fee. However, you might have a difficult time finding a bank to cash them or merchant to accept them at your destination.

If you want the level of security and accessibility comparable to what was previously offered by traveler’s checks, consider using a prepaid travel card. Many of these cards are accepted just like credit cards and comes with zero liability protection if your card is lost or stolen. Plus, a dedicated prepaid card solely for international use can help you avoid putting your everyday credit and debit cards at risk of fraud.

The peace of mind offered by prepaid travel cards comes at a cost, though. They may charge fees for foreign exchange, additional cards, balance refunds and periods of inactivity. Carefully read the fee summary of prepaid cards before you finalize your purchase.

Street vendors

In some cities, you may see small vendors or salespeople on the streets promising to exchange currency without fees. These are best avoided. The best case scenario is that you end up with a poor exchange rate. But since these vendors may not be regulated, you could end up with counterfeit currency or fall victim to a crime.

“Stop and ask yourself, ‘Does this look shady?’ If yes, then move on,” says Boneparth.

No one wants to lose buying power when transferring their dollars to foreign currency. By planning ahead, you can exchange currency without fees and make the most of your travel fund wherever your passport takes you.

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